When they start writing their will, many people in California think that they have to choose between leaving their estate to their family or giving their assets to charity. In fact, you can do both at the same time with a charitable trust. However, it’s important to know the differences between charitable trusts so you can make the right decision for your family members.
What are the differences between charitable trusts?
When you start the charitable planning process, you might prefer a charitable lead trust. This trust makes payments to your favorite charity over a period of time. When the time is up, your beneficiary gets the rest. Since you donated part of their inheritance to charity, they’ll get to take advantage of tax breaks and charitable deductions.
You could also leave your assets in a charitable remainder trust. With this type of trust, your beneficiary will receive monthly payments for a period of time. When the time period expires, the rest of the trust will go to charity. Unlike a charitable lead trust, a charitable remainder trust gives you the opportunity to donate your assets to multiple charities. Your beneficiary can collect payments from the trust for a maximum of twenty years.
If you’re not sure which option is best, an estate planning attorney could tell you more about the benefits of charitable trusts. You could also talk about different types of trusts if neither of these options works for you.
How do you set up a charitable trust?
You could talk to an attorney about setting up a charitable trust. To fund the trust, you could include cash, investments, properties and other assets. In addition to their financial benefits, charitable trusts could reduce the amount of taxes that your beneficiaries have to pay. You might also qualify for certain tax breaks.